Skip to main content

In a unanimous opinion issued today, the Federal Trade Commission upheld a July 2004 initial decision by Administrative Law Judge (ALJ) D. Michael Chappell, ruling that Kentucky Households Goods Carriers Association, Inc. (Kentucky Association) engaged in illegal horizontal price-fixing in violation of the FTC Act, and that the state action doctrine does not immunize its collective rate-making from prosecution under federal antitrust laws.

Writing on behalf of the Commission, Chairman Deborah Platt Majoras wrote, “The principal issue here is whether the state agency responsible for supervising Respondent’s ratemaking engaged in the necessary ‘active supervision.’ . . . [W]e find that the state has fallen far short of the conduct needed to satisfy the active supervision requirement, and therefore the state action doctrine does not apply.” Accordingly, the Commission ruled that the Kentucky Association must cease and desist from collective rate-making, and that it be required to cancel and withdraw all existing tariffs and tariff supplements on file with the state.

The State Action Doctrine

The Supreme Court first articulated the “state action” doctrine in Parker v. Brown, 317 U.S. 341 (1943), which held that, in light of the States’ status as sovereign entities, Congress did not intend the Sherman Act – a primary U.S. antitrust law – to apply to the activities of the states themselves. In subsequent cases, the Court ruled that the activities of private entities conducted under state authority may be shielded from federal antitrust scrutiny by the state action doctrine.

States, however, may not simply authorize private parties to violate the antitrust laws. The Supreme Court has held that the state action doctrine shields private conduct from the antitrust laws only when a two-pronged test is satisfied. First, “the challenged restraint must be ‘one clearly articulated and affirmatively expressed as state policy,’” and second, “the policy must be ‘actively supervised’ by the state itself.” In FTC v. Ticor Title Insurance Co, 504 U.S. 621 (1992), the Supreme Court clarified that the purpose of the “active supervision” inquiry “is to determine whether the State has exercised sufficient independent judgment and control so that the details of the rates or prices have been established as a product of deliberate state intervention, not simply by agreement among private parties.”

The Commission’s Opinion

The Commission’s opinion states that the ALJ concluded that “the Respondent’s ratemaking activities constitute unlawful horizontal price-fixing, and that Respondent is not entitled to the state action defense. We agree, and affirm the decision of the ALJ.” The opinion continues by stressing the importance of the state action doctrine, but states that, “By enabling the displacement of the antitrust laws, however, the doctrine can also allow the implementation of programs that produce powerful anticompetitive effects, including higher prices and fewer choices for consumers.”

The opinion describes the case proceedings before the ALJ, the Respondent’s state action claim, and how the state action doctrine developed through case law over the last 65 years. It provides background on prior state action cases brought by the Commission, most notably Indiana Household Movers and Warehousemen, Inc., Dkt. No. C-4077 (April 25, 2003), before describing the state supervision process in Kentucky.

“In this case,” the Commission writes, “the statute that authorizes the [Kentucky Transportation Cabinet] to establish collective ratemaking expressly provides that these procedures must ‘assure that respective revenues and costs of carriers . . . are ascertained.’” Under Kentucky law, the KTC is responsible for ensuring that every rate charged by carriers is “just and reasonable. . . The KTC, however, has no formula or methodology for determining whether the Kentucky Association’s collective rates comply with the statutory standards.” The KTC “does not even obtain data – including the cost and revenue data specified in the statute – that would enable it to assess the reasonableness of the Kentucky Association’s rates . . . [and] lacks the procedural elements – such as public input, hearings, and written decisions – that courts have found to be important indicators of active state supervision.” Accordingly, the FTC wrote that it agreed with the ALJ that KTC had fallen “far short of the active supervision required by Ticor, Patrick, Midcal, and other relevant cases” to support a state action defense.

Finally, the opinion addresses whether the Kentucky Association’s rate-making conduct, if not shielded by the state action doctrine, violates antitrust laws. The FTC concluded that, “The fact remains that the majority of Respondent’s members voluntarily engaged in collective tariff filings. This activity is collective rate-making – concerted activity to fix or stabilize prices that historically has been condemned as per se illegal price-fixing . . . the need for formal KTC approval of proposed tariff filings does not change the fact that the participating carriers agree on rates they will charge.”


The FTC’s July 2003 administrative complaint against the Kentucky Association was one of three complaints filed concurrently against intrastate household goods movers that addressed the state action doctrine. According to the complaints, the associations violated the FTC Act by engaging in price-fixing in the form of filing tariffs containing collective rates on behalf of their members. The other complaints were filed against the Movers Conference of Mississippi and the
Alabama Trucking Association, both of which subsequently entered into consent orders with theCommission, barring their allegedly illegal anticompetitive conduct, in October 2003. The Kentucky Association appealed a July 21, 2004, ruling by ALJ Chappell that it had engaged in horizontal price-fixing, in violation of the FTC Act that was not immunized by the state action doctrine.

The Commission vote to approve and issue the opinion was 5-0. The opinion and final order can be appealed to a U.S. Court of Appeals.

Copies of the Commission’s opinion are available from the FTC’s Web site at and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

(FTC Docket No. 9309)

Contact Information

Media Contact:
Mitchell J. Katz,
Office of Public Affairs